By Sam Boughedda
Shares of Crown Holdings (NYSE:CCK) were downgraded to Neutral from Overweight, with its price target cut to $71 from $115 by JPMorgan.
Analysts there said the allure of Crown shares is now probably more its relative value.
"The shares are lower by (30%) over the past year versus a (15%) decrease in the S&P, and the stock has decreased 36% ytd versus a (19%) lower S&P. The shares are now trading at about 8x estimated 2023 EBITDA down from roughly 10.0x," wrote the analysts, adding that JPMorgan believes it is difficult for Crown to capture an enhanced trading multiple with little free cash flow generation likely for 2022 or 2023, earnings headwinds from elevated interest and pension values, and slow and uncertain EBITDA growth prospects.
"The company has refinanced $1b of expiring 1% debt with floating rate debt. We expect interest costs to rise from $270m to about $350m in 2023. The company is also facing a pension headwind of about $30m for 2023. Currency translation is also likely to be negative for the first half of 2023. Natural gas costs in Europe are also likely to be an issue for the company in the first half of 2023 and Crown benefited from hedges put in place late in 2021 that have expired. We think Crown’s EPS in 2023 is likely to inch higher at $6.80 per share versus our estimate of $6.70 in 2022," the analysts added.
However, they concluded that the firm does not believe it is reasonable to assign Crown an Underweight rating given its recent loss of value and likely stabilization of earnings in 2023.